Unemployment Claims Drop For The Wrong Reason

Continued unemployment claims dropped substantially. Why?

Continued Claims

Continued state unemployment claims lag initial claims by a week.

Continued claims are more important than initial claims. It is continued claims that determine the official unemployment rate.

The rate is set by survey on the week that contains the 13th of the month, the weeks in boxes.

Suspect Improvement

Last week I reported, "Seasonally-adjusted continued claims fell from 11,183,000 last week to 10,018,00 this week."

This week we see continued claims fell from 9,373,000 to 8,373,000.

We had massive revisions primarily in California which was investigating fraud. 

Continued Claims Distortions

  1. BLS Methodology Change on August 29.
  2. California is so messed up it froze reporting. California is now reporting
  3. People in some states have expired all of their state benefits and thus fell off the rolls.

In a subsequent post, I will take a deeper look at expiring benefits. 

Expired benefits are not a good reason for claims to be dropping. Expect more of it.  

Initial Claims

Initial  State Unemployment Claims in 2020 October 22  Report

Initial claims continue a very slow downward trend. They were also impacted by California which is now back reporting. 

Given the recent surge in Covid cases and state restrictions, we are likely to see a reversal in initial claims. 

Initial claims and continued claims are seasonally adjusted.

Primary PUA Claims in 2020 

Primary PUA Claims in 2020 October 22  Report

Primary Pandemic Unemployment Assistance

Unlike state claims, PUA applies to people working part-time, gig workers, and self-employed workers who do not qualify regular state unemployment programs.

The PUA claims are not seasonally adjusted. They were heavily revised due to California.

Over 10 million people receive PUA. This is where most of the fraud is hidden.

I suspect most of it is not fraud, but no one knows the real numbers due to the loosy-goosy nature of the program.

In terms of determining unemployment, I believe that at least 2 million of those 10 million are genuinely unemployed.

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